According tomedia the Verge, “007: No Time to Die” may be the “last straw” to save Regal and Cineworld, but some analysts believe that the only thing that can really save U.S. cinemas is the COVID-19 vaccine. On Thursday, Reagal Cinemas, the second-largest U.S. theater chain with 536 theaters, announced that it would officially close all U.S. theaters for the second time during the new global pandemic. Its parent company, Cineworld, will also close 127 cinemas in the UK. More than 45,000 people could lose their jobs or be laid off, with no timetable for reopening.
The good news is that AMC and Cinemark, America’s first and third-largest cinema chains, will not follow Regeal’s lead, respectively. They all confirmed Tuesday that more than 80 percent of their U.S. theaters are open and will remain open despite Regeal’s decision. Financial records show AMC lost $2.7 billion in the first six months of 2020 and Cinemark $230 million.
That’s not surprising, because when people stopped going to theaters, each company’s revenue evaporated, with AMC and Cinemark’s revenue down 98.7 percent and 99 percent, respectively, from the previous summer, to less than $20 million and less than $10 million, respectively — while Cinemark paid $65 million in rent. “They’re in a state of no income, which is the worst you can imagine.” Benchmark analyst Mike Hickey said.
Every theater chain has publicly said it will have to hold out until 2021 unless things change – despite taking on hundreds of millions of dollars in debt this year, renegotiateing rents with landlords, laying off tens of thousands of employees, cutting wages and permanently closing a small number of cinemas.
Cinemark sold only $37,000 worth of movie tickets and $124,000 in coupons in the second quarter. Picture: Cinemark Cinemark.
When the theater closes, many costs drop sharply — but that’s still $65 million worth of rent in the second quarter. Picture: Cinemark Cinemark.
Michael Pachter, an analyst at Wedbush Securities, explains that this is mainly a rental issue. These big theater chains basically don’t own their own buildings, so even if they stop showing movies, quit their employees, stop selling food — Cinemark had to throw away $2.4 million worth of perishable food last quarter — they still have to pay rent, and it’s only a matter of time before landlords, many of whom have to pay their mortgages, charge rent. “If we don’t get some effective vaccines soon, you don’t know how long landlords will be patient.” Pachter said.
And that’s just a few of the big companies left, which (along with Regal) make up only 53% of the U.S. film industry. On September 30th the National Association of Theater Owners warned Congress that “69 per cent of small and medium-sized cinema companies will be forced to filing for bankruptcy” if the situation continues as it did in the second quarter. “A lot of them are small chains. I don’t think many of them will survive,” Hickey said.
It’s not as bad as it was in the second quarter, because the numbers are not as bad as they were when U.S. theaters were basically closed. AMC and Cinemark only really reopened in August, before Christopher Nolan’s Creed was released. The academy had hoped that “Creed” would bring audiences back, and its directors and bosses have repeatedly insisted that the film will not skip the theater and need to be watched there.
But “Creed” opened with just $20 million over the Labor Day weekend and failed to break through $30 million even on September 13. Now it’s grossing more than $300m worldwide, but exhibitor relationship analyst Jeff Bock says it may not be good enough: a $205m budget coupled with a huge marketing campaign, the film could take $450m to break even.
“It’s a high-stakes game, and Creed’s highest grossing box office in the world could be $350 million,” he says. Before the pandemic, he added, it was estimated to be a movie that grossed more than $700 million.
After seeing the benefits of the early Creed, Warner Bros. quickly decided not to risk those viewers, pushing Wonder Woman 1984 to Christmas. But with “007: No Time to Die” and “Dunes” each a year behind, and Regal Cinemas closing, one wonders if Wonder Woman is really coming this Christmas. What would the theater do if Wonder Woman 1984 (or Disney/Pixar’s Soul) were to be delayed further?
“You need good content to get people back to the cinema,” Hickey said. “He believes that if cinemas are to survive, studios and theater owners need to coordinate, not keep pushing down, movies. In a good sign, he said, Disney hasn’t postponed Soul yet, and if key markets like Los Angeles and New York reopen cinemas and maintain security requirements and “play some good movies,” he thinks audiences will start returning.
But Pachter says it doesn’t matter until there’s a vaccine, because people are still afraid of possibly getting COVID-19 — “Imagine hearing someone coughing in the theater,” he says — and neither Benchmark and Wedbush want things to get back to normal any time soon. “From mid-March 2020 to mid-March 2021, the box office was almost destroyed,” Pachter said, calling it a “lost year” for the industry. Hickey says his company’s model will make us “close to normal” in 2022.
And Pachter argues that it’s “very easy” for studios to keep pushing back movies in the hope of finding audiences later — especially since the outbreak initially created a multi-moon void in filmmaking, leaving gaps in filmmaking — but they won’t do so forever because there isn’t enough room. There are 130 big studios that release movies every year, and there are only so many that can be pushed before cinemas can show them.
” (We) have to be prepared for the inevitable, and if it all goes into next summer, one (or more) major cinema chains such as AMC, Regal and Cinemark may not survive.” Bock said of the impact of COVID-19 on theaters. There are a number of factors that may prevent the vaccine from reaching until then. But even if one or more large cinema chains fail, it won’t be the end of big-screen movies in the United States.
Many analysts don’t think Disney’s experiment with skipping cinemas with Magnolia must have been a success — or that Netflix, Amazon and other streaming streams would simply snap up blockbusters, affecting the theater’s survival in the process. Studios still need cinemas to maximize revenue. “The cinema will survive, but it may not be run by the same people.” Pachter said. He points out that simply turning a multi-room theater into a department store is not easy, and suggests that while hundreds or thousands of theaters may close, failed cinema chains may simply be snapped up by new investors.
“The vaccine is coming. If it’s a year from now, I think the owner of the theater chain will change. If it’s within the next 3 months, everyone will survive. “Pachter said.” Even if it were announced 10 months later, I think the owners would work with the studio chain and not force them to leave. Don’t know is the risk. “